MacroVoices #554 Dr. Anas Alhajji + Louis-Vincent Gave: Developing Crises in Middle-East and France

The episode covers two major geopolitical and economic crises: the Middle East energy crisis and France's unfolding sovereign debt crisis.

Dr. Anas Alhajji reports from the Energy Week conference in Riyadh, where Saudi officials emphasized that 'there can be no energy future for all without energy security for all.' The three seas crisis—disruptions in the Gulf, Red Sea, and Black Sea—has fundamentally altered energy markets. Saudi Arabia is expanding east-west pipeline capacity from 5.5 to 10 million barrels per day and planning a pipeline through the Empty Quarter to Oman within 2-3 years to circumvent the Strait of Hormuz. Despite airport closures from attacks, Saudi Arabia successfully hosted five conferences with record attendance, demonstrating sophisticated logistical capabilities.

Crucially, U.S. Energy Secretary Chris Wright reported that 80-90% of pre-conflict crude oil flows through the Strait of Hormuz (13-14 million barrels daily) have been maintained, but only 25-35% of refined product flows have recovered. This product deficit is the true crisis: diesel shortages persist globally due to lost refinery capacity in Russia, Saudi Arabia, UAE, and Western nations (particularly Germany and California). Anas emphasizes that crude oil has no value without refineries to process it into usable fuels.

The conference revealed a shift in energy policy rhetoric: oil and gas will remain central to global energy for decades, with renewables and alternative sources being 'additions' rather than replacements. Countries are pursuing energy security through infrastructure redundancy and import/export diversification, creating new volatility patterns not yet incorporated into market outlooks. Notably, Germany's economy minister announced plans to reopen closed refineries despite previous climate commitments—a signal of how the crisis is reshaping energy policy globally.

Anas highlights emerging threats: Indian sugar crop failure (worst in 11 years) threatens ethanol production; low water levels in European rivers and Indonesian waterways disrupt biodiesel deliveries via barge. These agricultural and logistical shocks compound refinery shortages. He argues that Western leaders enabling refinery destruction are creating conditions for China to dominate global refining capacity and leverage this through its Belt and Road Initiative, while advancing Arctic maritime routes with Russia as alternatives to vulnerable chokepoints.

Louis-Vincent Gave analyzes France's crisis as a 'typical emerging market debt crisis' despite France being an advanced economy. France has 44% tax-to-GDP ratio (versus 24-25% in the U.S.), meaning it's on the wrong side of the Laffer Curve—raising taxes further would reduce revenue. Most French debt is now held by foreigners (European pension funds and insurance companies), making it a career risk for investors to hold French assets as the situation deteriorates. Gave divides France into three hostile zones: Zone A (urban professionals, EU-flag supporters), Zone B (migrants/service workers in suburbs, Palestinian flag supporters now rioting), and Zone C (rural areas with Marine Le Pen's Rassemblement National support).

France faces a confluence of crises: fiscal (unsustainable deficits), energy (diesel shortages from refinery losses), economic (stagnation), social (riots spreading from other European countries), and political (President Macron polling in low teens with no authority). Gave argues France needs either to raise the retirement age to 70 or devalue currency by 50%—neither of which any candidate is proposing. Leaving the euro would devastate European insurance and pension funds holding French debt and would disrupt the balance sheets of systemically important French banks with large derivatives operations.

The political shift is stark: as Zone B riots intensify, Zone A voters are moving to Le Pen's protection party despite her having no money to govern. The broader euro risk is qualitatively different from 2012-2013: Germany is no longer an industrial powerhouse but is losing market share to China, so Germany cannot simply write checks to bail out Europe. The rise of the AFD party in Germany openly questioning euro membership creates additional pressure.

Folowing Anas's analysis of China's refining dominance, Gave notes China is advancing Arctic maritime routes with Russia and manipulating product prices to control global markets—deciding the terms of geopolitical resolution through economic leverage. Gave recommends trading the euro weakness against peripheral currencies (Norwegian crown, Hungarian forint, Icelandic crown, British pound) which offer positive carry, or buying volatility on euro-yen and euro-renminbi pairs.

The Market Desk segment identifies deterioration across credit markets: junk bonds remain technically weak with rising credit spreads, private equity credit (BIZD) reaching fresh lows, and technical support on the S&P 500 only 1% away from potential CTA sell triggers. Meta earnings disappointed despite positive fundamentals because expectations were too high. Mag7 stocks remain concentrated (35% of S&P 500) but many AI stocks have broken lower. Gold and uranium stocks face selling pressure despite supportive long-term stories.